A recent case involving a house damaged in 2005 by Hurricane Wilma has come to a close due to a ruling from the Supreme Court in Florida. The case may be over, but the details surrounding it bring up some interesting points in insurance theory.
According to this post from the Naples Herald, homeowner John Sebo filed suit against American Home Assurance Co., Inc. for refusing to pay for repairs needed to Sebo’s multi-million dollar home in Florida. After Sebo had initially filed the claim, the insurance company claimed it could only cover $50,000 for mold damage.
What was American Home Assurance’s reasoning behind this refusal?
They claimed that construction defects were what caused the water damage to the home even though wind and rain were the primary causes of the damage.
Once the claim was brought to trial, Sebo found himself in possession of supporting briefs from the Florida Association of Public Insurance Adjusters and United Policyholders, a consumer group.
As it turns out, the case involved an interesting theory in the insurance industry called “concurrent causation” (referred to as “somewhat-esoteric” in the linked article). Concurrent causation is defined as:
An insurance theory stating that if loss or damages occur as a result of more than one cause, one of which is covered (insured) while the other is not, the damages are likely to still be compensated for by the insurer.
Earlier I mentioned the construction defects brought up by the defense in Sebo’s case. Most would file this under a bad faith strategy, but considering that Sebo filed a lawsuit against the original architect of the home, it seems in fact the property did carry some construction defects. However, the relation to this theory in insurance goes back to how these construction defects worked in conjunction with the wind and rain from the hurricane to cause the home to fall into an irreparable state. Thus you have a case of concurrent causation caused by both the construction defects and the wind and rain.
Once the trial pressed forward, Sebo ended up with a $8.07 million compensation. While the appeals court overturned the decision, the supreme court reversed the appeals court decision and sided with Sebo.
What was the majority opinion?
…there was no dispute that rainwater and hurricane winds combined with the construction defects to cause the damage. Perry wrote that “there is no reasonable way to distinguish the proximate cause of Sebo’s property loss — the rain and construction defects acted in concert to create the destruction of Sebo’s home.”
Though not stated explicitly, it seems Justice James E.C. Perry may have seen the usefulness of an insurance theory like concurrent causation.
What do you think? Is this concept of concurrent causation truly esoteric, or should it be standardized?